Builders and developers across Australia would welcome this budget announcement but lament the lost opportunity to deal with the big fiscal issues.
Budget Deficits are now far from dirty words – they have become economic orthodoxy – this year to the tune of $210 billion in just a single year.
The Government has sought to stimulate the economy by:
- Investing in new infrastructure which will create jobs now and into the future
- Stimulating demand with tax cuts for low and middle income earners and cash payments to pensioners
- Target incentives to drive new construction through amendments to the First Home Loan Deposit Scheme
- Wage subsidies for apprentices and the provision to businesses to claim losses against previous year’s taxes paid
This is welcome. But the economic crisis created by COVID-19 was an opportunity to take a serious look at tax reform. An opportunity for big picture reform – one that Peter Costello, John Howard, Paul Keating or Bob Hawke would not have let slip by. Why not take a look at Ken Henry’s excellent review? Revisit the widening of the GST base. Get rid of distortionary taxes like stamp duty and payroll tax. Every tax review since 1984 has recommended exactly this – but what we got tonight was a solid but un-exciting speech.
The Federal Government has heard the calls from industry, led by Urban Taskforce Australia, to make industry support packages relevant to the engine room of the Australian economy – Greater Sydney.
But … even within the narrow cast of this budget speech, there is still more to be done. Urban Taskforce re-iterates our call for changes to the HomeBuilder criteria. Just as thresholds were adjusted State by State for the First Home Loan Deposit Scheme to include different thresholds for capital cities and areas outside each capital, the same thresholds should be applied to HomeBuilder. Greater Sydney, including Newcastle, should have apply to a Homebuilder threshold purchase price of $950,000, and the timeframes should be extended by a further 18 months to make homebuilder relevant to apartments (which take longer to build).
The Commonwealth Budget has failed to address one important area of significant economic concern.
Australia has always relied on foreign investment, in periods of growth and in periods of economic crisis.
During the GFC the Australian Government made it easier for foreign investment to occur. This was a big reason why our property industry kept afloat and kept tens of thousands of workers employed. By contrast, during the COVID-19 pandemic, the Commonwealth and State Governments have made it harder for foreign investors to invest in Australia. Foreign investors pay higher stamp duties and land taxes; higher withholding taxes and are subject to strict FIRB rules – all deterring foreign investment.
Foreign investment has the capacity to bring in billions of dollars to local projects and supports Australian jobs.
The Government needs to increase the FIRB threshold to where it was pre COVID-19. State Stamp Duties and Land taxes should not discriminate from foreign investors. Withholding taxes need to be reduced for at least the COVID-19 period.
These additional taxes and FIRB processes applied to foreign investors are ludicrous. There is no threat to our sovereignty posed by a foreign investor, including north American pension funds, investing in an apartment block, a build-to-rent residential tower or a house and land package on the fringes of our cities.
The Urban Taskforce calls for the Commonwealth to now turn its attention to re-opening our borders to foreign university students, skilled migration and high net worth investors. Australia has proven itself to be a safe, democratic and medically sound nation. The Commonwealth should be welcoming these new immigrants with open arms, supporting additional flights and supporting hotel quarantine undertakings from the States.
- Continue with demand stimulus as proposed
- Widen the applicability of HomeBuilder to make it relevant to Greater Sydney and apartments
- Relax FIRB review of new home financing from foreign investors
- Open-up Australia (safely) to skilled migrants, foreign students and those willing to invest in Australian jobs by supporting additional flights and quarantine facilities
- Take a serious look at reform of the tax system
By Tom Forest, CEO, Urban Taskforce